Ensuring to keep today’s business running may already be a key challenge, but it is also important to keep an eye on the longer term, for ensuring the vitality of your organization. Particularly in such a way, that your short-term decisions (for fixing today’s issues) …

  • … do not create barriers for your strategy realization;
  • … and help significantly increase the success of your strategic objectives.

Nearly 30% of strategic objectives fail due to lack of resources, being the key motive why 60% of the organizations want significant improvements on this domain.

EIU & PMI®

So, it is already during the initiation of those initiatives that we must put significant attention to the capacity planning and resource management process. How? By performing a deliberate evaluation if sufficient capacity can be assured for properly staffing the initiative. The organization’s strategy should enable you to make clear fundamental choices based upon this evaluation. Let us discover how you can organize this.

Long-Term capacity planning vs. Resource Management

As an organization, we cannot do everything simultaneously, so our success depends mainly on implementing the things with the highest combined impact and urgency first. The selection which initiatives and projects should have a higher priority (and the corresponding access to resources) is a strategic choice that must be made at C-level.

And this is where we deliberately differentiate between capacity planning and resource management, as these two concepts are not the same. They have different organizational goals and therefore provide different outputs, so cannot be confused, or used interchangeably.

"Long-term capacity planning is the high-level balancing act between (again: high-level) capacity supply and demand. It requires strategic thinking and identifies and analyzes the gap between capacity demand for the planned strategic portfolio, and the realistically expected available capacity".

It is not an exact science, because at this moment in time we must often work with rough estimates and many assumptions. But when sufficiently analyzed, both structural capacity shortcomings will quickly surface, as well as areas where there may be great threats of continuous resource management issues. structural cases and threats can then be dealt with more proactively when defining our portfolio, thus significantly increasing our chances of realizing what we planned for.

When we look at the model, we previously talked about, we can easily explain what the difference is between long-term capacity planning and resource management.

RM-model_2.png#asset:3961

While Long-Term capacity planning is defining high-level resources on strategic level, Mid-Term and Short-Term resource management is assigning resources and resolves issues at a functional level, respectively named resources. However, in case resource issues cannot be resolved at these levels, leading to structural resources issues, the feedback loop goes back to the strategic level to reduce or adjust the strategic plan as needed (reduce demand or increase supply).

How much capacity is realistically available & how much do we need?

Before estimating how much capacity is realistically available and how much you will actually need, you need to understand the capacity demand & supply in an organization’s RUN and CHANGE trajectory.

1. We first look at the capacity demand for our day-to-day operations, the ‘RUN’ organization.
From a management perspective, this is rather predictable, but we need to reserve an average capacity for non-productive work, like internal meetings, training etc. This knocks of a fair share of available capacity (20% is quite a reasonable estimate). When not taken into consideration, don’t be surprised that as a consequence you’ve already significantly overestimated the realistic remaining capacity availability for your portfolio. Thus, project flow will dramatically go down and a three months project can quickly end up taking 9 months or even more.

On top of that, the RUN also contains a rather short-term management dynamic, which is typically caused by incidents. For high-level planning purposes (as long-term capacity planning requires) we can estimate the average capacity demand for responding to incidents well. If this ‘incident’-capacity is not included in the calculation, in practice capacity originally planned for projects and programs will be deployed for fixing short term needs. E.g. When the operation (= RUN) gets stuck somewhere, management immediately gets feedback and needs to fix it (urgency!). If consequently a project task is delayed with one day, no one will immediately notice. But if this happens consistently to projects and programs, you should not be surprised that projects will lose focus, as well as their perceived priority, and always deliver late.

RUN Capacity Demand = operations (often quite predictable) + incidents + unproductive moments.
This RUN capacity is NOT available for programs and projects.

2. When looking at the total available capacity, the remaining capacity is available for CHANGE.
With CHANGE, we mean realizing the planned portfolio. It is this capacity which needs to be balanced with the high-level capacity demand for the envisioned programs and projects, which at that moment in time still has a relatively high degree of uncertainty. This is a high-level risk management exercise to better understand and manage the risk of overloading our resources.

"Organizations that effectively integrate strategic portfolio management (= the Long-Term capacity planning) with resource management (Mid-term & Short-term) in programs and projects, have a total overview. They understand the relationship between, and the required capacity for, their existing products and services (RUN) and their current projects and programs for implementing the strategic course of the organization (CHANGE) and can also adapt to operational or strategic updates, if needed".

What did we learn?

  • LT capacity planning is not the same as resource management; it is the balancing act of high-level capacity demand and supply on strategic level, therefore defined at C-level;
  • The RUN organization needs on average more capacity than what’s only defined when everything runs as planned (e.g. Incidents, team meetings,… etc.);
  • Capacity planning is high-level oriented and not an exact science, but it already provides a good indication of likely structural capacity imbalances between the strategic ‘dream’ and the capacity ‘reality’ ;
  • Identifying structural capacity conflicts proactively, buys us time for finding acceptable solutions with stakeholders and preventing decision making in crisis-mode.

What’s next?

The above explains the rational model, which to be honest is not the hardest part when implementing strategic Long-Term capacity planning. What is much harder to get a hold on are the more ‘soft management’ components, the human behavior, which play an essential part in its success. In our next blog we will take a deep dive in these; what we’ve experienced and, on our way forward, learned to understand as well as how to deal with these in practice.

Anton Zandhuis

Anton Zandhuis
Sr. Consultant NL & PM trainer

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